How the Paris climate deal has led to 'dangerous complacency'

Tue, Dec 5, 2023, 9:24 AM

SEANA SMITH: COP28 is well underway in Dubai as global leaders meet to discuss the ongoing climate crisis. Now, the Paris Climate Agreement did set the stage for net-zero carbon emissions by 2050, giving companies a deadline of how quickly and efficiently these emissions need to fall. But our next guest does say that in addition to providing some clarity, the time limit has contributed to a, quote, dangerous complacency.

We wanna bring in Henry Fernandez, MSCI Chairman and CEO joining us now. It's great to see you here. And thank you so much for taking the time to join us from COP28. Let's talk about that quote that I just read there, a period of dangerous complacency. I guess, help put in perspective for our viewers and for us some of the challenges that you see it presenting in terms of that timeline.

HENRY FERNANDEZ: So the Paris Agreement that was reached in 2015 is gonna be remembered as one of those landmark agreements in the history of humankind. So we all celebrated for sure.

Part of that, though, was that the date that they put for decarbonization was an outside date in order to get 200 countries to agree. And that's obviously 2050. This problem is happening right now. You know, there's existential threat to the world, to portfolios, to companies, to households, to people living in, you know, all areas of the world. So he has led to some complacency that they don't have to deal with the problem until the 2030s and the 2050s. This is already happening.

BRAD SMITH: Henry, you know, it's amazing because we're coming off of and probably about to close the books on what might be the hottest year on record that we've seen. And so there's been even more focus around what the real impacts and volatility in climate mean and the steps that we need to rapidly take.

You know, thinking through COP26 and what we're-- COP28, excuse me, and what world leaders are saying going into and even during some of these meetings, does it sound like they are sounding the five alarm fire to say, we need to do something right now?

HENRY FERNANDEZ: For sure. We all need to blow the horn that this is a clear and present danger to all of us and the world. A lot of progress is being made. But there is still a long, long way to go.

So I think world leaders are trying to do that. They're trying to alert their citizens, their population, that it's supposed to be taken seriously. It doesn't mean that all of it is happening right now or that it will happen in the next few years, but that we need to get on this process of decarbonizing and derisking and finding alternative sources of energy so that we can have, you know, $100 trillion economy thriving and creating prosperity and economic growth for citizens of the world.

SEANA SMITH: When it comes to some of the priorities or, I guess, opportunities and the risks in terms of how companies are assessing climate risk, you talk about the fact that there's an essential here need for the finance and investment in terms of finding some of those large-scale solutions. I guess, how are companies assessing this in your perspective?

HENRY FERNANDEZ: So the first thing is that like any market when there are investors and users of capital, all of that depends on information. It depends on data. It depends on analysis, views, judgments, opinions, research.

And we are at a stage in which that's what we're building now. We're building the information so people can assess the opportunities and the threats in their portfolios with all those companies, whether it's equity or bonds or alternative investments.

So a lot of what is being worked on right now in these COPs is the infrastructure to provide that. It's about the disclosures. It's about the data. It's about the regulations. It's about the analysis. And then over time, then people are gonna start looking at all of that and determine what is a good value, what is a bad value, what is a good risk, what is a bad risk, and then determine prices and determine trading-- you know, what you buy, what you sell, what you keep.

So right now, a lot of the focus is building that foundation as a means to an end right. It's the foundation to be able to then assess risk and return in securities and in investments.

BRAD SMITH: Henry Fernandez, MSCI Chairman and CEO, thanks so much for taking the time to help us break this down. Appreciate it.

HENRY FERNANDEZ: Thanks for having me.

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